Rodrigo's Abstraction: Capitalism, Inequality, and Reform Over Time and Space

Abstract

American capitalism can rightly be criticized for failing to reform itself in any meaningful way following the Great Financial Crisis of 2008. Yet, this is not an inherent flaw of capitalism as some, such as Richard Delgado, suggest. Historically, such as during the Great Depression, American capitalism did achieve egalitarian reforms. In other nations, such as Denmark and Japan, more egalitarian forms of capitalism have taken root. These more egalitarian forms of capitalism occurred within systems featuring much lower economic inequality than that which prevails in the US in recent years. This suggests that capitalism can devolve into lawless capitalism under conditions of high economic inequality, whereby economic elites can dominate law and regulation to entrench themselves in ways that retard general macroeconomic growth. This is consistent with theoretical and empirical work from economics. The article concludes that high economic inequality (not capitalism per se) presents a unique danger to core values of capitalism, such as meritocratic competition, sustainable economic growth, and a broad distribution of economic opportunity. This is all consistent with the thesis of Lawless Capitalism which posits that high economic inequality led to legal and regulatory subversion for great profit for small bands of financial elites and great cost to the entire global economy during the Great Financial Crisis of 2008. Further, the US now faces the prospect of an entrenched elite with massive economic power and the incentive to sabotage economic growth for profit.

Keywords: Law & Economics, Capitalism, Economic Inequality, Financial Crisis of 2008

JEL Classification: A1, B15, E65